1. Bubba Manufacturing has estimated the following costs of debt and equity capital for various proportions of debt in its capital structure (assume no preferred stock):

   % Debt Debt Cost % Stock (Equity) Equity Cost

   30% 4.4% ___________ 10.8%

   40% 4.8% ___________ 11.4%

   50% 5.5% ___________ 12.5%

   What is the best amount of debt and equity for Bubba Manufacturing if it wants to have the lowest cost of capital